JPMorgan has increased the price target for Garmin Ltd . (NYSE: NYSE:GRMN) to $185 from the previous $175 while maintaining a Neutral rating on the stock.
The banking firm recognized Garmin's strong performance, noting that the company's shares have outperformed the broader market and its sector, with a significant gain of 37% compared to the S&P 500's 15% increase.
Garmin's current valuation is trading at a premium, approximately 29 times, which surpasses the five-year average of around 23 times. This has led to growing investor concerns, despite expectations for a raised full-year outlook. Analysts at JPMorgan anticipate that any increase in the outlook may fall short of the high expectations set by the current valuation.
The company's management is expected to continue its pattern of modestly revising full-year revenue and earnings guidance upward in the second quarter, a strategy that has been typical in the past. JPMorgan has adjusted its full-year forecast for Garmin, predicting a more substantial increase than the company's usual pattern, primarily due to stronger-than-expected demand in the Fitness segment, as indicated by a rise in Garmin Connect Downloads.
Despite the upward revision in revenue and earnings estimates by JPMorgan, the firm's earnings forecast for Garmin in 2024 stands at $6.10, which is higher than the previous guidance of $5.40 and above the consensus of $5.68. However, the analyst suggests that this figure may still disappoint when compared to the even higher expectations of the buyside estimates.
Garmin reported a record-setting first-quarter revenue of $1.38 billion, a 20% year-over-year increase, with fitness revenue alone climbing 40% year-over-year to $342.89 million. It maintained its full-year guidance, attributing new product release schedules as a factor in future quarters.
InvestingPro Insights
As Garmin Ltd. (NYSE:GRMN) captures the attention of investors and analysts alike, real-time data from InvestingPro provides additional context to JPMorgan's assessment. Notably, Garmin's ability to consistently raise its dividend, doing so for 7 consecutive years, aligns with the company's robust performance. This is further supported by Garmin holding more cash than debt on its balance sheet, which is a reassuring sign for investors looking for financial stability in their investments.
Moreover, Garmin's P/E ratio, currently at 24.83, is in line with near-term earnings growth, suggesting that the company is trading at a reasonable valuation relative to its earnings potential. The company's revenue growth also stands out, with an increase of 12.98% over the last twelve months as of Q1 2024, indicating a solid top-line expansion. Additionally, Garmin's return on assets at 16.67% reflects efficient use of its assets to generate profits.
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